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Saas Eats ETA: How to Navigate Software as a Service in the ETA Ecosystem

October 24, 2022
October 24, 2022
7 min read

In August of 2011, the Wall Street Journal published Marc Andreesen’s now famous Op-Ed “Why Software is Eating the World”. Andreesen (2011) proclaimed: 

“Software is eating the world…my own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.” 

For anyone not paying attention for the last decade, spoiler alert: he was right. While we are all keenly aware of the success and broad reaching impact software as a service (SaaS) companies such as Adobe, Salesforce, Hubspot, Calendly, Zoom, and others have had on big business over the last decade, possibly less obvious is the presence and opportunity for a similar revolution and application of SaaS technology within smaller, lower-middle market businesses. 

Specific to the Entrepreneurship through Acquisition asset class, according to data compiled by the Stanford Graduate School of Business (Kelly & Heston, 2022), in 2012-13 just over 40% of Searchers targeted Internet or IT/Technology businesses for acquisition when kicking off their Search. In 2020-21 Stanford noted that 75% of Searchers are now targeting technology companies. With the broader software as a service market growing nationally at close to 20% per year and technology finally reaching the SME market in a meaningful way, it only makes sense that the SaaS transformation phenomenon has run smack dab into the ETA community – SaaS Eats ETA. 

Next Coast ETA sits at the crossroads of technology and the Entrepreneurship through Acquisition (ETA) asset class by working closely with Next Coast’s venture arm (Next Coast Ventures) and given our broad experience as investors in technology and former Searchers. We felt it important to dig deeper into the trend of rising interest in acquiring and operating SaaS businesses, with the hope of providing some shared wisdom, cautionary tales, and waypoints for current and future Searchers and the search community.

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